Nigerian Breweries to intensify local raw materials sourcing for improved earnings
To mitigate foreign exchange challenges encountered during the 2016 financial year, Nigerian Breweries Plc, has announced plans to intensify its local sourcing of raw materials as well as seek further improvements in its sorghum value-chain.
Besides, the brewer also noted that it would be consolidating its earnings and profitability through improved market penetration with its innovative products, adding that it would carefully assess its price adjustment strategy in ensuring a balance in the management of input costs and price consumers are willing to pay for its products.
At a current sourcing level of about 50 per cent of its raw materials locally, the brewer is optimistic of achieving its 60 per cent target before 2020. Speaking to journalists ahead of the firm’s yearly general meeting, the Managing Director of Nigerian Breweries, Nicolaas Vervelde, said the company is making progress with its partners – International Fertilizer development Centre (IFDC), and Psaltry International, a local processing company, on value extraction from cassava.
Vervelde said Nigerian Breweries was also making progress in the deployment of new hybrid sorghum varieties, adding that yields have increased over time in line with the firm’s growth projections.
He also expressed optimism in the company adapting to policies in the operating environment in order to deliver good return on investment to stakeholders. “It is anticipated that economic activities will improve in 2017 considering the far reaching fiscal and monetary measures being planned and implemented by the Federal Government. It is therefore hoped that with the gradual rise in the price of oil and a steady increase in the volume of oil output, the Naira will be strengthened and forex will be more available for businesses.
“The brewed product market would remain competitive and consumers are expected to continue the down-trading as they seek for more affordable brands. Cost leadership and market leadership supported by innovation remain our key strategic pillars”, he added.
On the company’s Q1 results, Vervelde explained that the cost of goods sold increased by 25 per cent as a result of higher input costs while results from operating activities and profit after tax grew by seven per cent and nine per cent respectively, impacted by lower net finance charges and a continued focus on its cost efficiencies.
Revenue for the period grew by 18 per cent due to the impact of price increases implemented in 2016, to cushion the effects of the operating environment. He further said that Nigerian Breweries has developed a set of competing portfolio to address the needs of a diverse consumer base, even as he decried the low per capita consumption of beer in the country.
He said while Nigeria has a large population of over 170 million people, it only consumes 11-litres per person, while other countries with large population have far higher consumption per capita.
He added that the performance of the beer industry in the last year has been a reflection of the economy, noting that the industry has been undergoing slow growth mainly due to recession and low consumer purchasing power.